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A federal district court in Washington has dismissed a Lyft driver's lawsuit against his personalautomobile insurer, finding that the insurer's initial denial ofhis claim had been reasonable.

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Logged off Lyft during collision

On the morning of June 17, 2016, Daniil Trofimovich, who had“Platinum” status with Lyft, meaning he was entitled to certainbenefits, including roadside assistance, received a fare requestfrom Taelor Dinson. According to Mr. Trofimovich, during the ride,Ms. Dinson told him that she was in a tough financial situation andwas worried about how to get home.

Mr. Trofimovich said that he offered to drive her home for freeand gave her his cell phone number and that she texted him thatafternoon and asked for a ride home. According to Mr. Trofimovich,he logged off Lyft at that time, around 2:18 p.m., picked up Ms.Dinson and, about five or 10 minutes into the trip, collided withanother car at an intersection.

About an hour after the accident, Mr. Trofimovich calledProgressive to report it and make a claim. He told the customerservice representative that the police report said the accident hadoccurred at 2:43 p.m. He also stated, “I was working and I wasdriving for, uh, what's it called, Lift [sic],” and he responded inthe affirmative when asked if he was “working at the time.”When asked if he had a passenger, he responded, “I did have apassenger.”

Mr. Trofimovich also turned down the representative's offer tocall him a tow, saying, “I'm trying to get Lift [sic] to do it 'cuzthey're supposed to pay for it, like, or pay for a big chunk ofit.”

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The representative's initial notes read: “IMMEDIATE CONCERNS:INSURED WAS DRIVING FOR LYFT AT THE TIME OF THE ACCIDENT. [GUESTPASSENGER] WAS A CUSTOMER.”

Conversation with Progressive claims adjuster

The next day, when speaking with Progressive claims adjusterAmber Sandbergen, Mr. Trofimovich stated that Ms. Dinson was not apaying customer, but a passenger whom he had transported for free.Mr. Trofimovich said, “We had used [Lyft] earlier in the day . . .because I was working . . . and then I was just giving her a rideback home afterwards. . . . [H]er mom's got cancer orsomething.”

Mr. Trofimovich further stated that he was “trying to do afavor.” He told Ms. Sandbergen that he had clocked off an hourbefore he had driven Ms. Dinson home.

No coverage letter

On June 30, 2016, Progressive sent a letter to Mr. Trofimovichadvising him that there was “no coverage for this loss because [hewas] driving for Lyft at the time of the loss and coverage for this[was] excluded under [his] policy.”

The next month, Mr. Trofimovich sent Progressive a notice underWashington's Insurance Fair Conduct Act (“IFCA”) indicating hisintent to sue Progressive.

Progressive contacted Mr. Trofimovich's counsel regarding thebasis for the notice; counsel responded that Mr. Trofimovich had nofare in his car at the time of the accident and that, becauseProgressive had ignored the supporting evidence he had offered, hewould bring claims under IFCA, the Washington Consumer ProtectionAct (“WCPA”), and common law.

Progressive reversed initial denial & extendedcoverage

On July 29, 2016, Progressive extended coverage for Mr.Trofimovich's loss. On September 30, 2016, Progressive issued Mr.Trofimovich payment for the full amount of the damage to hisvehicle.

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Meanwhile, on August 26, 2016, Mr. Trofimovich suedProgressive, alleging that it had “refused and continue[d] torefuse to pay for the full damages it caused” due to its “wrongfuldenial” of his claim.

Mr. Trofimovich alleged claims for breach of contract, commonlaw bad faith, WCPA violations, and IFCA violations.

Progressive moved for summary judgment dismissal of all claims,arguing that it had accepted coverage and had paid for all damageto Mr. Trofimovich's vehicle and that its previous denial ofcoverage had been reasonable based on Mr. Trofimovich's initialstatements.

The insured argued that he was entitled to consequentialdamages, including lost wages and attorneys' fees, arising out ofProgressive's initial denial of coverage. (AP Photo)

Demand for damages for initial denial of coverage

Mr. Trofimovich also moved for summary judgment, arguing that hewas entitled to consequential damages, including lost wages andattorneys' fees, arising out of Progressive's initial denial ofcoverage.

The Progressive Policy

The Progressive policy excluded coverage for damages arising outof the use of the insured vehicle while:

carry[ing] persons or property for compensation or afee.

Washington Law

Under the IFCA, an insured who was:

unreasonably denied a claim for coverage or payment of benefitsby an insurer may bring an action in the superior court of thisstate to recover the actual damages sustained, together with thecosts of the action, including reasonable attorneys' fees andlitigation costs.

Wash. Rev. Code § 48.30.015(1).

Court: Initial denial of claim 'reasonable'

The district court granted the insurer's motion, finding thatProgressive's initial denial of Mr. Trofimovich's claim had beenreasonable.

In its decision, the district court explained that Progressivehad initially denied coverage because it had accepted Mr.Trofimovich's first statements that he had a paying customer in hiscar at the time of the accident. In the district court's opinion,it was “plainly reasonable to interpret his statements as such.”The district court noted that Mr. Trofimovich had stated that hewas a Lyft driver, that he was working at the time, that he had apassenger, and that he expected Lyft to pay for him to tow thecar.

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The district court rejected Mr. Trofimovich's suggestion thatProgressive had a duty to further inquire as to whether hispassenger was a paying customer.

'Amended statement'

The district court acknowledged that Mr. Trofimovich hadsubsequently clarified, or, in Progressive's view, had amended, hisstatement, and observed that Progressive had made the choice toreject one of two apparently conflicting statements, something thatcould “not be uncommon in claims adjusting.” The district courtruled that this “alone” did “not render Progressive's denialunreasonable.”

Then, the district court rejected Mr. Trofimovich's causes ofaction.

First, it dismissed his breach of contract claim against theinsurer with prejudice, ruling that Mr. Trofimovich had notidentified a contractual duty that Progressive had breached. Thedistrict court noted that Progressive ultimately had paid for thetotal damage to the automobile covered by Mr. Trofimovich's policy,adding that the fact that Progressive allegedly had done so as a“business decision” to avoid litigation was “irrelevant.”

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Next, the district court dismissed Mr. Trofimovich's bad faithclaim against Progressive, explaining that to succeed on thatclaim, Mr. Trofimovich had to show that Progressive's breach of hisinsurance contract had been unreasonable, frivolous, or unfounded,and that it already had concluded that Progressive's denial ofcoverage had been reasonable.

Incorrect denial of coverage does not constitute unfair tradepractice

For the same reason, the district court dismissed Mr.Trofimovich's IFCA claim.

Finally, it dismissed his WCPA claim, concluding that “anincorrect denial of coverage” did “not constitute an unfair tradepractice if the insurer had reasonable justification fordenying coverage.”

The case is Trofimovich v. Progressive Direct Ins.Co., No. C16-1510-JCC (W.D. Wash. Aug. 8, 2017).

Steven A. Meyerowitz, Esq., is the director of FC&S Legal,the editor-in-chief of the Insurance Coverage Law Report, and thefounder and president of Meyerowitz Communications Inc. Email himat [email protected].